Some Quick + Dirty, Sloppy Notes About the Economics of Advertising + Information Markets: Then, Now + In the Future

Over the years, I have written several articles related to the economics of advertising and information markets, but over the past week or two I have come up with a rather simple way to not only think about advertising, but also (perhaps) a way to analyze it with data that might be lying around somewhere for someone to apply for free or at a very low cost.

The first step is to go back (in your mind) several decades — before the Internet. This will, of course, be difficult for so-called “millennials” and even younger folks, but perhaps they can try to imagine it. Back then, there were basically two ways businesses could get a message across: Either directly or by piggy-backing (with someone else’s help). The quintessential direct play was the vacuum-cleaner or encyclopedia salesman, who rang the doorbell and tried to sell the crap right from the doorstep or perhaps by squeezing through the doorway to perform the pitch right in the living room. All door-to-door salesmen were hated more than virtual spam.

Another less virtual kind of spam was (and perhaps still is) quite common: Direct mail, flyers, etc. In case you are familiar with such junk mail, then this is a wonderful leftover flash from the past that will serve very well as an example. If XYZ company chooses to advertise their products / services directly to you via your mailbox, then they will have some small amount to pay to do so. Beyond postage, the company will also have to pay for printing a leaflet or whatever kind of flyer they intend to use for their “offer”. This may be a quite small price to pay — but it is not zero.

In the past century, a very significant “ad-supported” media industry also developed — mainly due to two significant ways the industry could differentiate the delivery of messages. First: the ad-supported media could reap economies of scale, because the price of delivering messages was quite low per message if they could deliver many messages (so, for example: the classified advertising business model flourished throughout the 20th Century). Secondly: Advertisers could assume that the ads in ad-supported media would be paid attention to — primarily because people quite often actually still paid a nominal amount to receive an ad-supported media package (e.g. newspapers). As time went by, big businesses sought greater attention — and high-priced “full page” ads were segregated from the cheap “remnant” advertising which were shuffled off into the “back pages”.

Along came the Internet, and large parts of the advertising industry were essentially eradicated overnight — mainly due to the fact that publishing costs were all of a sudden “too cheap to meter”.

Today, we find ourselves in the midst of a period sometimes referred to as e-cunabula — in which both electronic messages and paper-based messages exist side-by-side. In the paper-based formats, it may very well be that people still pay particular attention to ads because they are paid messages (sometimes these are also referred to as “paid media“). What is particularly noteworthy here is that the very same message costs so little or practically nothing whether it is delivered as an ad (“paid media”) or whether it is delivered directly from a business’ own website (“owned media”). Why would an advertiser pay money to deliver a message that they could just as well deliver for free (i.e. “too cheap to meter”)? Perhaps they are willing to pay this extra fee simply because they are afraid that otherwise no one would pay attention to it.

This is a very precarious state for ad-supported media industries to be in. If people become aware that the ads they see in ad-supported media are not any more worthy than the same messages delivered without such payment, then all messages should move from ad-supported (“paid”) media to business-owned websites (“owned media”). Perhaps to put it the other way around makes the point more obvious: The main reason why some ads still appear in ad-supported media is because the message is so weak that otherwise no one would pay any attention to it at all. Appearing in ad-supported media would become a tell-tale sign much like a black eye is a sign of a lost fight.

In the future, successful businesses will no longer show up as the weaklings who show up in ad-supported media today. The forward-thinking business is compelled to make its authentic business pledge as compelling to the consumer as the consumer is eager to learn about the offer.

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Dicey Concepts Leading to Muddy Waters: Recall, Precision and Filter Failure

The first two of these three blind, dicey concepts have a long tradition in information science: Recall and precision are both based on another rather sketchy notion — relevance. The basic idea of relevance has a noble motivation: to return what the searcher considers to be truly relevant. However: What a searcher considers to be relevant will most likely vary wildly from day to day. There is simply no “true score” of “relevancy” that is valid for all people, or even for the same person in different situations. Beyond that, recall and precision are also often purported to be in some kind of inverse relationship. This is hogwash — please: do the math!

While the above fallacies are widely known in circles versed in information science (and in particular information retrieval), there is a much more grave fallacy that was spread years ago by a professor of journalism, most of whose work I find quite alright — but I am sorry to say that Clay Shirky seems to have muddied the waters greatly with his notion of “filter failure” (note that he has apparently not published anything about “filter failure” on his own website, but there are many videos on the web documenting a talk in which he proposed this idea).

Designing a tool to filtrate muddy waters is far less efficient than simply excluding them in the first place. If you pour a mixture of spurious particles into a melting pot, you should not be surprised to find a rather shoddy amalgamation as the result. The main problem in information retrieval today is not, as Professor Shirky argues, “filter failure”. The main problem is the failure to adequately select the proper sources of information (sometimes also referred to as “information resources”) at the outset.

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Kant’s Big Mistake?

In my previous post I referred to Kant’s “Categorical Imperative”. Here, let me entertain the following suggestion: That Kant made a big mistake.

Kant wrote a lot. If he was consistent in his thinking, that would mean that he wanted everyone to write a lot. Now since he lived several hundred years ago, Kant never had to face the prospect of having to read dozens, hundreds, thousands or even millions of volumes of text, with rarely one of them rising above the level of completely ephemeral blather (in my opinion, this is primarily due to how the coincidence of copyright law and mass production of printed paper had not yet taken its course into its swirling destiny of mind-numbing confusion). Had Kant ever envisioned the world we live in today, he would have probably immediately had a heart attack and died on the spot right then and there.

There is some irony to how my main goal in life is something quite similar to making this frightening, horrific vision actually come true — but to do so in a way that might satisfy the hopes and dreams of literate people everywhere. One of the main reasons why I am so focused on literacy is that I do not feel that publishing hogwash improves anything anywhere (except, perhaps, for people who “make money” that way — and in particular only insofar as it fulfills their financial obsession and their fetish for cash).

Yet I feel optimistic enough to believe that everyone is particularly literate at something… — what’s your thing?

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Go Inspire Yourself!

Seeking inspiration outside of yourself is problematical.

One of my inspirations has a habit of referring to something as “Kantian” — referring to using any maxim as if it were a universal law. If everyone wished to be inspired by someone else, then the burden of being the last in the line of expectations would be rather heavy. Likewise, attempting to inspire others seems doomed to fail due to the often quite shallow depths of intellectual resources available. :|

How to escape from this quasi-conundrum?

There are no easy answers to this problem, but here is one idea: Immortalize yourself! Live in a way that has no expectation of a future, no sorrows or regrets about the past — neither of them exist here and now. You will not become anything, you will not receive a reward, you will not find the truth. Simply exist and enjoy yourself in the present. :)

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Legal Online Content

This phrase bothers me.

I’ve been traveling a lot over the summer and also the past couple weeks, so I haven’t had much chance to get online and post. But today I saw this phrase in the newspaper (again), and it stuck out as such an obvious piece of propaganda that I thought I should post a remark about just how absurd and ridiculous it is.

There is no such thing as “online content” — content resides on storage devices, it can be read by computers, shared by servers, etc. … but there simply is no such thing as online content. I imagine some idiot thought up the phrase while he was floating on cloud nine.

Even worse than that, the stupidity of “online content” is actually trumped by the completely vacuous “legal online content“. Legal according to which laws?!? The buffoon who came up with this zinger must get paid a lot of dough, and I bet 9 out of 10 consumers will swallow all of it without batting an eyelash.

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Why people used to go to church + why they now go to Google + Facebook instead

In case you haven’t seen them yet, check out Part 1 and Part 2.

For many years, I have maintained that Google is something like the Pope of the Internet: Google’s index functions quite similarly to what used to be referred to as the Index Librorum Prohibitorum (well, it actually works in revers — linking to “allowed” content rather than “prohibited” content, but either way it’s essentially all about censorship).

There are many reasons why people used to go to church — and truth telling sermons were only one of them (and for those who might have snored during the sermon, even these were perhaps not a very compelling reason). Sitting in wooden pews was probably also hardly one of them (pun intended ;) ).

Maybe the homemade chewy chocolate brownies were a motivator; perhaps the coffee helped; singing in the choir might have played a role; but certainly all of the chit-chat and latest gossip exchanged after the more pious and reserved service were probably a prize worth holding out for. This is, of course, a function now taken over by Facebook (so-and-so got married, little X’s birthday is coming up, etc.)

If you are able to convince someone that you have the undeniable truth, or that the inside scoop is to be gotten exclusively behind your four walls, then this may indeed be comparable to reinventing the wheel. If you were able to do that, you may very well be on your way to creating a really big deal — a part of what John Battelle refers to when describes how publishers seek to have “folks keep coming back” for more.

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How the Traditional Publishing Complex Tamed the Mob … and What Outsiders Could Learn from Justine Musk

So far, the Internet has only experienced one major crash: The very poorly named “Dot Com” crash of 2001. This had nothing to do with the “dot com” top-level domain per se. It had much more to do with a much more general and very much premature hyping of all things Internet — and then when it became clear that 9 out of 10 ideas were hare-brained, 9 out of 10 online business models went out of business. Note, however, that by this time the Internet had already become — or at the very least it had started to become — a force to be reckoned with. This was the first heyday of bloggers and wikis — for example, consider what happened when¬†Trent Lott spoke on December 5, 2002 at the 100th birthday party of Sen. Strom Thurmond of South Carolina:

In the wake of controversy, Lott resigned as Senate Republican Leader on December 20, 2002, effective at the start of the next session, January 3, 2003. Bill Frist of Tennessee was later elected to the leadership position. In the book Free Culture, Lawrence Lessig argues that Lott’s resignation would not have occurred had it not been for the effect of Internet blogs. He says that though the story “disappear[ed] from the mainstream press within forty-eight hours”, “bloggers kept researching the story” until, “finally, the story broke back into the mainstream press.

By the time Digg was founded in 2004, it had become very clear to the traditional publishing industry that something was afoot: their business was eroding from beneath — and if something didn’t happen quite soon, then the traditional publishing industry would be gone in short shrift.

Note that the traditional publishing industry had been a crucial element in many advanced economies worldwide, strongly influencing education, research, propaganda and much, much more. If this were to simply crumble and break overnight, a much larger traditional publishing complex would probably go down with it — and therefore many people were very worried. Some more examples of this worrisome trend included many new websites created around a “classified advertising” model (such as craigslist), and Google’s then-still-new AdWords system.

Then, some time around 2006, things began to change. Perhaps the most indicative instance of how things were changing was the “Google Press Day” event held on May 10, 2006 (Google has since removed links to the documentation it had disclosed about these presentations from its investor.google.com website). Although this event was not widely covered by the press, it was attended by many leaders in the publishing industry. Google officers explained their business model, and how they were tweaking their algorithms so that searches for terms such as “credit card” would be made to return search engine results pages (SERPs) with the brand names of companies doing business in that market segment. All in all, Google seemed to be making a case for mutual collaboration with the traditional publishing complex, rather than competing with it.

Since then, many other websites are using a similar approach — and most prominent among this new model of “co-opetition” is, of course: Facebook. Yet large parts of the so-called “mobile web” are also very much about advertising to users, and also tracking user behavior. Google, Facebook & Co. had now become transformed from a “Wild West” marketplace into a partner that more and more members of the traditional publishing complex could work with quite well — and thereby increasingly publish traditional publishing stories in a newfangled way… called “social media“.

The advantage of this new approach for members of the traditional media complex is that they no longer need to compete with the revolutionary mobs found in the innumerable and uncontrolled spaces on the “Wild West Web”. Google, Facebook, Twitter, et. al. would reduce such “unknown” people into insignificance, and instead promote those brands which the entire traditional publishing complex have come to rely on. Although many people will probably not recognize the similarity to the way some North African governments collaborated with North African Internet service providers to basically “turn off the Internet” in North Africa during the Arab Spring, the leading brand names operating in the “social media” space can very effectively squelch out any message that is in opposition to the messages advertisers seek to get across.

If you are not an advertiser, not a publisher, not a member of the traditional publishing complex,… — if you are not affiliated with this industry in any way, then what can you do (if you want to be heard)?

Some people may choose to go out on the streets and protest, but others may find that to be a nuisance… — or at least a rather ineffective alternative. Also: It is not clear whether the best solutions are to be found by figuring out which group can shout the loudest. What if your aim is to find solutions to problems through rational thought?

Beyond polishing up rational thinking skills, such outsiders might also need to brush up on literacy skills — especially those literacy skills that are not taught in most educational systems: The ability to effectively express and also to publish your own ideas in a manner that will enable readers who are thirsty for enlightenment to easily grasp the useful and practical advice such information can provide.

One of my favorite leaders in this field is Justine Musk — not necessarily because of the topics she writes about, but primarily because of her great skill in doing so. Justine has a knack for explaining topics in a very simple and straightforward manner — and these are topics her readers are very thirsty to read more about. Her arguments are usually well thought out, and therefore they are usually also very compelling.

I have not read any of Justine’s fiction-writing, but in my opinion most of her non-fiction writing campaigns are very successful.

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Do you understand the gravity of the matter?

The other day I argued that there is no such thing as an objectively “true” language (at least not for feeble-minded humans). If you missed that, then please go ahead and check out “Science vs. Relativity” before venturing on. ;)

Today, I want to underscore how important this is for regular folks living everyday lives.

Let me first note that there is a huge sector of the education industry that has been busily working on creating such “true” and/or “scientific” languages for quite a long time already… — and the fanatical advocates of such “truthers” often carry flags with the letters “STEM” written on them (which are supposed to stand for “science”, “technology”, “engineering” and “mathematics”, respectively). Some invent abstract symbols like “2”, “4”, “+”, “=”, etc. (and then have fun creating tautological statements like “2 + 2 = 4″), others collect holy measuring sticks (and other physical objects) and use these to measure things, and newer breeds devise algorithms that are suppose to produce meaningful output, such as “standard deviation” or “gross national product”.

What most of these intellectual games have in common is — very broadly speaking — the notion that there is “one right answer”, and in order to figure out this correct answer you simply have to observe data in the real world and then plug it into a formula. In theory, there should be no ambiguity whatsoever — either something is, or it isn’t…. There is no “maybe” — definitely (note, however, that some scientists — for example Einstein — were very careful and repeatedly warned about how to interpret statistics… especially with regard to such ideas as certainty, uncertainty, “hard facts” and so on).

Ideally (for STEM fanatics), if the world followed the theoretical textbook (instead of the other way around), then it might even be possible for one theory to “match up” with another theory — in other words, that the data would “line up” and one theoretical equation might essentially entail another equation, too. The entire universe might work as one huge interconnected clockwork machinery-thing.

But alas, we are mere mortals… and so far we haven’t collected enough data yet. :|

The most fanatical of such data wizards would go forth with “punch cards” and remind you that your entire genome is nothing but a stream of ones and zeros… :| — but if asked what a “genome” is, they might have a somewhat glazed look in their eyes…. :|

In the real world, the first thing you do in the morning is to get up, maybe make some coffee, perhaps eat a bite of this or that, but most importantly: SMILE! :D

Ask any data wiz how “smile” can be translated into ones and zeros — they will without a doubt be dumbfounded. 8O

Smiles and clouds are extremely important in our daily lives, but they simply do not translate into simple “STEM” formulas.

The real world is wall-to-wall maybe. Uncertainty lurks around every corner. We do our best by making educated guesses (like: “has the day started yet?” might be answered with “the sun has been up for half an hour already!” [note though, that such statements are not completely "unscientific" either ;) ]).

Languages that have evolved over many millennia (rather than being “invented” more-or-less overnight) are streamlined by evolution in order to meet the needs of their “users”… and this often means they are adapted to working well in particular contexts (for example: if it is important for users to differentiate between “snow” and “ice”, then there may very well be easy ways to express such differences in the language the users choose to use [and such choices will also affect the development of the language -- again: as described by Piaget's concepts of "accommodation" and "assimilation"]).

The point is this: Since the world is (from our limited point of view) inherently uncertain, there is no reason to favor an unambiguous, quasi-“scientifically-correctcontrived “fly-by-night” language over a language that has gone through thousands of years of evolution. To do so would be on par with an attempt to re-invent the wheel. Why would anyone want to do that?

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Science vs. Relativity

In science, there is a tendency to prefer universal truths over localized observations. For example: the reason why people believe that gravity is a scientific “fact of life” is not simply because one apple happened to fall down on someone’s head somewhere, and also not because they happened to fall down in England at some point in time, but rather (so the theory goes) that all kinds of matter will behave the same way throughout time and space. Scientists cannot really make direct observations across vast spans of time or space, but they are nonetheless very willing to make universal statements in the name of science.

There is some nuanced irony to the idea that observations from experiments should be “verifiable”. The idea behind this is that a scientific law should always hold true, but the irony is that the conditions are never exactly the same (since time has elapsed, the universe has changed, etc.). Besides: Perhaps the reason why something happens is entirely hidden from our ability to observe it. Perhaps the most amazing thing of all is that so many believe science to be undeniable truth.

One of Einstein’s significant contributions to the field of science was his notion of “frame of reference”. According to this view, the same phenomena can be interpreted differently, according to which frame of reference one happens to take. Hence, the moon seems to revolve around the earth when a stationary earth is taken as the frame of reference… but both revolve around the sun if the sun is considered the (stationary) frame of reference, and so on (with regards to the Milky Way galaxy, etc.).

Each frame of reference can be see as its own “world view”, a way of describing the universe from a particular vantage point, a particularly localized speck in space (and time). The elements of vastly complex systems may be viewed differently from each of these different frames of reference, and these different points of view may very well give rise to different languages — different ways of observing, and perhaps also different observations — see also “Noam Chomsky Talks at Google“.

As Professor Chomsky emphasizes in the interview¬† linked above, the loss of any one of these world views (i.e., languages) is a loss for humanity, a further limitation of perspective. Our knowledge of the universe becomes lessened each time we eradicate another way of describing it. Having a single, universal language would be extremely limiting! Again: Ironically, this is what many seem to expect from “science”.

Whether or not this is a valid objection to the hegemony of “science” as a universally true language, we also need to take a step back and consider what this means for regular humans: Most people would no longer be able to speak at all. You could no longer say “you”, “me”, “I think”, “yesterday”, “right now”,… nor indeed most of the elements of any natural whatsoever. Consider something as simple as noting the image a cloud in the sky makes: In order to speak precisely, your remark would have to make reference to every single speck of dust in the sky, every single water molecule attached to every single speck, all of the atoms moving in various directions, and all with reference to some centralized universal frame of reference. Even if this weren’t impossible, it would still be so ridiculously complicated that it would vastly exceed what any single human being could muster.

Every single moment of every single day, we all vastly over-simplify the vast complexity of the world we live in — in order to be able to make any sense of it at all… and we each do this by invoking various frames of reference, each tailored to the contexts we experience. We constantly interpret the world around us — as Piaget said: by accommodating and assimilating new observations into our already acquired knowledge about the world, thereby constantly revising and reformulating our language(s).

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Public Transportation in the United States of America

I was traveling in the USA this summer, and after I had a very negative experience due to an incompetent worker in the public transportation industry I vowed I would write a blog post about it. Actually, I sort of threatened it, saying if that Greyhound did not apologize for the poor service (which lead to a delay of several hours, such that we were no longer able to arrive during daylight hours :| ) then I would call them out on it.

Well, if I hadn’t written the previous bit, then I would have lied before — and I didn’t want to do that, either.

With that out of the way, I would like to add something more useful to this topic. Put simply, public transportation fails in the United States of America for no other reason than this: Many / Most Americans don’t want public transportation. If the public doesn’t want public transportation, then public transportation doesn’t need to work. If public transportation doesn’t need to work, then why invest any money in trying to make it work? Wouldn’t it make much more sense to simply employ incompetent people at minimum wage and not to worry about what they do at all? Granted, not all people who work in public transportation are incompetent, but apparently no one to cares whether they are or not.

It seems that in the USA, the way the so-called “free market” incentivizes someone to be more than incompetent is to pay more than the minimum wage. I don’t know the exact numbers, but it seems to me that the main difference between someone receiving unemployment and the minimum wage is that people who receive the minimum wage are will to get up and do something (whether they do it well or not doesn’t seem to matter all that much).

Until Americans realize that their level of consumption of fossil fuels is preposterously high, there doesn’t seem to be much reason for them to want public transportation to work. Although the next oil shock — if it is significant enough — might make that happen, Americans are still completely unprepared for it. It will probably be messy, but there is no doubt in my mind that it will have to happen sometime… and probably sometime relatively soon.

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